Caught Between the Elder Care and Education Money Pits

Anne Campbell is the kind of person who thinks ahead. An attorney specializing in elder law, Campbell, 51, spends much of her professional time helping clients maintain control of their futures—drafting wills, creating trusts, and writing advance medical directives. But now, Campbell and her husband, Dave, 56, are finding themselves pinched in ways they hadn't anticipated. They're putting their son and daughter through California Polytechnic State University at the cost of roughly $20,000 a year for each . They're also digging deep into savings to care for their aging parents. So when the couple's retirement investments lost 38% last year, their plan to slow down and shift to volunteer work in the next few years had to be put on hold. "Now we must assume that any job we can get and keep, we must take," Anne says with a sigh. Dave, who worked in management at Anheuser-Busch, took a less-than-golden "pewter parachute" when the company was acquired by InBev last year, says Anne. He currently helps manage her law practice. "We were just getting to the point where we were going to start enjoying life and travel a lot." Anne and Dave are stuck in what's known as the sandwich generation: people who care for aging parents while also supporting children. Even before the recession hit, sandwich generation members had to cope with pressure from both sides. With the downturn, they're facing harsher financial burdens. The result? People such as the Campbells are disregarding stock advice by cutting back or eliminating retirement savings, delaying retirement, and even raiding retirement accounts to help others stay afloat. New research by Country Financial found that 47% of parents are putting college expenses for their kids ahead of their retirement savings, up from 42% in 2008. In a recent survey of caregivers by, 45% of respondents reported that they are providing some kind of financial support to elderly parents as a result of the recession. And an ING (ING) Direct poll in April found that nearly one in five parents who have savings set aside for their kids have tapped those accounts to cover bills or pay off debt. That's exactly what many experts say you shouldn't do. But even financial professionals are realizing that economic realities don't always mesh with well-crafted master plans. The same folks who dish out the fundamentals of financial advice—save for retirement, build an emergency fund for a rainy day, keep your estate plan in order—are learning some hard lessons that are causing them to rethink the advice they give to others. Anne Campbell is one of them. She's "stringently" advising clients to save more to meet health, retirement, and education needs. She's also working with local officials in her hometown of Vacaville, Calif., to develop cooperative housing for the elderly. "The ultimate irony of my situation is that every day I try to get the word out about what's coming to help people to avoid disasters," she says. But, as Anne can attest, even the smartest financial plans can go awry. Anne's father, for example, a retired fireman, had assumed his health-care expenses would be covered after a massive stroke. Now the City of San Diego is contesting the extent of his worker's compensation, so the family is paying for care and medical bills. Total cost so far? Almost $70,000. The Campbells also need a new family health insurance plan because Dave's COBRA coverage is running out. Anne, meanwhile, is losing up to 100 billable hours each month because of her caregiving duties. To hunker down, the family has cut out vacations, restaurants, birthday presents, and new clothes. They haven't visited their vacation condo in Hawaii in over a year, and they are selling two all-terrain vehicles. They'll use the money to pay for tuition and to aid Anne's parents as well as her father-in-law, who has his own set of medical issues. If the couple has extra cash, it will be used for retirement savings. But that is a big if.


Delaying retirement savings is one of the biggest no-nos in financial planning. Conventional wisdom says kids can always borrow or find a job to pay for college, but no one will lend you money for your later years. "We have this natural instinct to help our kids and sacrifice our own plans," says Rande Spiegelman, vice-president for financial planning at the Schwab Center for Financial Research. "I don't believe you are doing your kids a favor if you go into hock yourself only to turn around and become financially dependent on your kids as you age." Spiegelman, who sees no quick fix for families like the Campbells, stresses the importance of setting a savings target with the help of online retirement calculators and then budgeting to meet those goals. Some financially savvy people who know what's considered wise advice have nonetheless been pressed to disregard it. Christopher Waddell, a certified financial planner with Raymond James (RJF) in Vienna, Va., has three young children, two of whom have autism. Occupational therapy, drugs, special teachers, and caregivers cost about $60,000 annually. Until recently, Waddell also spent $3,000 a month to keep his mother in a nursing home. (She died in December.) Waddell, 43, would love to channel the former nursing home fees into retirement savings, but he needs the money for his kids. With the help of his wife, Theresa, 44, an accountant, Waddell has tried to maximize his savings by taking tax deductions for rent and utilities for his caregiver, negotiating cheaper life insurance premiums, and setting up a health savings account that allows small businesses like his to stash away unlimited funds on a pretax basis for medical expenses. "You've got to get it wherever you can," he says. Although his two children with autism, ages 8 and 10, may never be totally self-sufficient, he is saving for his other child's college education—the son is 6—through a 529 savings plan. A live-in au pair who specializes in occupational therapy helps keep down treatment costs. Home-based caregiving often sounds like a cheaper, better alternative to a nursing home, but it can backfire. Just ask Lori Larson of Edina, Minn., who says her mother's health "fell apart" after her dad died four years ago. With two school-aged children and a husband who traveled weekly for his work in sales at Advanced Medical Optics, now a unit of Abbott Laboratories (ABT), Larson found it increasingly difficult to keep up with her job as an executive at Ameriprise Financial (AMP). "After a year of trying to find services to help keep my mother in her home, with me working and spending most weeknights with her and never seeing my family, I finally gave up and quit my career," she says.


Just before the real estate market tanked, Larson, 50, sold her mother's home for $200,000 to fund the $80,000 annual price tag for assisted living. At the time, Larson's mother was so ill from heart problems and other ailments that she did not expect to outlive her money. But she made a "miraculous" comeback, says Larson. "Here we are two years into it, and she's healthy as anything at 91. Who knows? She could live to be 100." As the primary decision maker for her mother, Larson now faces some tough choices. Should she opt to save money by moving her mom home even though she is thriving in assisted living? Should she sell her mother's lake house, which the family has had for 60 years? Would a reverse mortgage be a good way to help mom? "Before the market crash, we thought we had enough money," says Larson, who is considering starting an elder care advisory business in the fall to help pay for everything. "Now it feels more uncomfortable." Her family has cut back on energy use and delayed buying new cars. "What we are not going to do is make compromises on our kids' education," she says. Joy Loverde, author of The Complete Eldercare Planner, typically advises clients against quitting their jobs to care for an aging parent, because they often lose out on valuable benefits such as employee-assistance programs, eldercare services, company-sponsored health care, and retirement savings. A better option is to hire a geriatric case worker to manage a parent's care, she says. Loverde also warns about the downsides of moving elderly relatives into your home. "Asking people to live together after so many years apart is a huge challenge," she says. "The relationships have all shifted in one way or another, and few people of the sandwich generation realize the emotional aspects of the decision." Before inviting a parent to move in, Loverde advises asking some hard questions, including: Has the entire family agreed that this living arrangement is a good thing? Are you just doing it out of guilt? What happens if the arrangement doesn't work out? Financial adviser Jerry Paul, 56, of Essential Investment Partners in Denver, thinks he has those questions covered. Soon, four generations of Paul's family will share his 6,000-square-foot home in Greenwood Village, Colo. Paul's mother-in-law, Mary, 79, moved there in January from an independent living facility that cost $2,500 per month. His daughter Laura, 28, will occupy the finished basement with her husband, Spencer, and their one-year-old daughter so they can save for their own house. Paul's family, including his wife, Deb, 52, has spent much time discussing logistics. Because Deb and her mother are often home, Paul expects they will help with babysitting while Laura returns to school for a degree in medical transcription and Spencer works at his telecommunications job. Yet one lingering concern is how the kitchen will be shared among three women who all like to cook. Each family unit will get designated storage space, but most food will be shared and everyone is expected to help pay for it. In theory, Paul's arrangement offers a number of advantages to people who are juggling the logistics of caring for children and parents. Anne Campbell, for one, still wishes her parents, who live two hours away, would move in with her—even though she knows it could be a challenge. "As a society, we are not going to solve this problem unless we go back to the old days of families living together," she says. She often jokes with her law firm colleagues about buying a derelict motel in their California town, fixing it up, "and putting all of our loved ones in it." After a pause, she adds: "I'm only half kidding."

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Who's Responsible for Aging Adults? Big Question, Few Answers

Because of the recession, caregivers feel a greater need to keep working and have less time to help the elderly, says Cali Williams Yost, founder of consultancy Work+Life Fit in a guest blog for the Sloan Work & Family Research Network. She argues that employers, communities, and individuals must fix the problem together. The Washington Post Magazine offers a look at home health-care workers who are keeping the elderly out of costly nursing homes.

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